ADDING UP THE SPENDING FISCAL DISPARITIES AND PHILANTHROPY AMONG NEW YORK CITY CHARTER SCHOOLS Bruce D. Baker and Richard Ferris Rutgers University January 2011 National Education Policy Center School of Education, University of Colorado at Boulder Boulder, CO 80309-0249 Telephone: 303-735-5290 Fax: 303-492-7090 Email: [email protected] http://nepc.colorado.edu This is one of a series of briefs made possible in part by funding from The Great Lakes Center for Education Research and Practice. http://www.greatlakescenter.org [email protected] Kevin Welner Editor Don Weitzman Academic Editor William Mathis Managing Director Erik Gunn Managing Editor Briefs published by the National Education Policy Center (NEPC) are blind peer-reviewed by members of the Editorial Review Board. Visit http://nepc.colorado.edu to find all of these briefs. For information on the editorial board and its members, visit: http://nepc.colorado.edu/editorial-board. Publishing Director: Alex Molnar Suggested Citation: Baker, B.D. & Ferris, R. (2011). Adding Up the Spending: Fiscal Disparities and Philanthropy among New York City Charter Schools. Boulder, CO: National Education Policy Center. Retrieved [date] from http://nepc.colorado.edu/publication/NYC-charter-disparities. http://nepc.colorado.edu/publication/safe-at-school 2 of 49 ADDING UP THE SPENDING: FISCAL DISPARITIES AND PHILANTHROPY AMONG NEW YORK CITY CHARTER SCHOOLS Bruce D. Baker and Richard Ferris, Rutgers University Executive Summary In prominent Hollywood movies and even in some research studies, New York City (NYC) charter schools have been held up as unusually successful. This research brief presents a new study that analyzes the resources available to those charter schools, and it also looks at their performance on state standardized tests. The study reaches some surprising conclusions: Spending by NYC charter schools varies widely, and these differences in spending per pupil appear to be driven primarily by differences in access to private donors. The most well-endowed charters receive additional private funds exceeding $10,000 per pupil more than traditional public schools receive. Other charters receive almost no private donations. (The study‟s analysis is based on data from 2006 to 2008 contained in audited annual financial reports, IRS tax filings of non-profit boards overseeing charter schools and charter management organizations.) Outcomes also vary widely. However, there is little or no relationship between spending and test score outcomes after including appropriate controls. Some high-spending and some low-spending charters perform well, while others perform quite poorly. The study also finds that charters are, on average, not outperforming non-charter publics in NYC. NYC charter schools serve, on average, far fewer students who are classified as English Learners or who are very poor. Both groups of students require more resources to teach than do other students, meaning that charters with lower enrollments of these more resource-intensive students can devote their funding to other purposes. In fact, based on the differences in student needs, NYC charter schools should receive approximately $2,500 less in per-pupil support than the average funding received by same-grade-level traditional public schools. The assumption that these charter schools should receive support equal traditional public schools is incorrect, because they do not serve similar populations. About half of the NYC‟s charters are given a public facility by the city Board of Education (BOE). This places half of the City‟s charters in a much better financial situation than the other half. After controlling for the populations served, the study finds that charter schools not housed in BOE facilities receive $517 less in public funding than do non-charters. Charter schools housed in BOE facilities, however, receive substantially more resources ($2,200 on average more per pupil). This finding is worth repeating: Even before private donations are counted, the one- half of NYC charters with BOE facilities have substantially more money available compared with NYC’s traditional public schools. Once the philanthropic dollars are added, one would expect these charters schools to be noticeably outperforming other publics, but they are not. The study offers several recommendations, including the following: Given the crucial role of private philanthropy, future research should pay close attention to overall resource differences as part of the charter experiment puzzle, rather than looking only at public subsidy rates of charters. Policies might be considered to (a) balance resources for schools, whether charter or traditional public, that have less private philanthropic support, and (b) provide support structures for gaining more equitable access to philanthropy for under-resourced charter schools and traditional public schools. Under option “a” above, a common resource pool for supporting less-well-endowed charters might be generated by “taxing” private contributions to other charter schools. Policies should be adopted to more tightly link the amount of public funding to the needs of students served at all schools, whether traditional public schools or charter schools. This means adding much greater precision to data collected, annual auditing, and perhaps fiscal sanctions when schools fail to serve students with greater needs over an extended period of time. The findings with regard to New York City Charter Schools may or may not be transferable to other settings across the country. Certainly, the wealth and philanthropic culture of NYC is unique. Further, NYC is much larger than other cities and more racially and socioeconomically diverse as well, creating greater opportunities for cream-skimming, segregation, and neighborhood selection. But, many other cities—including Philadelphia, Houston and San Francisco—are struggling with similar issues and adopting comparable policies for mediating within-district funding equities, while simultaneously the number of charter schools is increasing. Leaders in these cities would do well to consider carefully the information and questions raised in this new study. ADDING UP THE SPENDING: FISCAL DISPARITIES AND PHILANTHROPY AMONG NEW YORK CITY CHARTER SCHOOLS Introduction This brief explores the financial resources of New York City charter schools. It also addresses differences in student population characteristics and student outcomes across New York City (NYC) charter schools, and evaluates how financial resources translate to other schooling inputs, such as more or less experienced teachers and smaller or larger class sizes. These schools are examined within the broader context of school funding equity and factors that other research has shown to have the potential to advance or disrupt educational equity. In American public education, funding equity involves multiple levels, linked to the multiple levels of our school systems. State systems govern local public school districts, with schools nested within districts. Public charter schools are either nested within districts or operate as independent entities. NYC charter schools are of particular interest to national audiences mainly because they have been used to argue that charter schools outperform public schools and that New York‟s experience with charter schools suggests a transferable, nationally scalable policy option. Three studies concerning NYC charter schools in particular are frequently cited: Dobbie & Fryer, 2009; Hoxby, Murarka and Kang, 2009; and CREDO, 2009.1 It is important to note, however, that the NYC context may be unique in terms of the role played by philanthropy and so-called venture philanthropy.2 Significant philanthropic attention has been focused on charter management organizations like the Knowledge is Power Program (KIPP) and Achievement First, which manage charter schools in NYC and elsewhere. NYC charter schools are both touted and blasted in the popular media as being the new favored charities of, for example, wealthy hedge fund managers.3 The extent that NYC charters have become philanthropic favorites means that NYC charter schools may be quite different from those in places like Missouri or Arizona, distant from the NYC philanthropic culture. In fact, even charter schools in Albany and Buffalo or across the river in New Jersey may be insulated from this unique financial setting. Therefore, additional philanthropic resources may explain a great deal of the claimed success of NYC charter schools. If this is the case, attempts to replicate or scale up these supposed successes would be more difficult and costly than assumed. This brief offers concrete information about NYC charters and their finances to help ground these important policy discussions. http://nepc.colorado.edu/publication/NYC-charter-disparities 1 of 56 Competing or Complementary Agendas? Equity, Choice & Charters The American public education system is under constant pressure from reformers focused on, among other goals, equity and choice. Equity reform advocates argue for adequate funding for all public schools as a means of producing greater funding equity and thereby ensuring that all children have the opportunity to attend high-quality, traditional, local public schools.4 Choice advocates push for making available more choices for students to be schooled in alternative settings, including public charter schools and private schools. They assert that choice is the policy mechanism that holds the most promise